Question: Len Wallace contributed assets with a $100,000 adjusted basis and a $400,000 FMV to Ace Corporation in exchange for all of its single class of

Len Wallace contributed assets with a $100,000 adjusted basis and a $400,000 FMV to Ace in exchange for all of its single class of stock. The conducted operations for five years and was liquidated. Len received a liquidating of $500,000 cash (less federal income taxes owed on the by the and the assets that he had contributed, which now have a $100,000 adjusted basis and a $500,000 FMV. Assume a 34% corporate tax rate.
a. What are the tax consequences of the corporate formation transaction?
b. What are the tax consequences of the corporate transaction?
c. Would your answers to Parts a and b remain the same if instead the assets had been contributed by Wallace to Ace If not, explain how your answer(s) would change?

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